I. Field of the Invention
The present invention generally relates to credit card products and, more particularly, relates to systems, methods, and articles of manufacture for managing penalty fees for financial accounts.
II. Background and Material Information
Credit card products have become so universally well known and ubiquitous that they have fundamentally changed the manner in which financial transactions and dealings are viewed and conducted in society today. Credit card products are most commonly represented by plastic card-like members that are offered and provided to customers through financial account providers, such as banks and other financial institutions. With a credit card, an authorized customer or cardholder is capable of purchasing services and/or merchandise without an immediate, direct exchange of cash. Instead, with each purchase, the cardholder incurs debt to their credit card account, which the cardholder may thereafter pay upon receipt of a periodic account statement. In most cases, the cardholder will have the option to either fully pay the outstanding balance or, as a matter of necessity or choice, defer at least a portion or the balance for later payment. For cardholders electing to defer payment, financial account providers typically assess interest or finance charges for the period during which payment of the outstanding debt is deferred.
Financial account providers assess penalty fees on customer accounts based on, for example, past due payments and overlimit charges. Delinquent cardholders or customers can cost financial account providers millions or even billions of dollars in revenue if payment can not be recovered. Furthermore, the financial ramifications on the delinquent cardholder is costly as well. For instance, issuers often charge customers penalty fees each payment period the customer has failed to make a timely payment or reduce an overlimit credit balance on an account. Together with interest charges and principal balance payments on the account, penalty fees may be more than a customer can financially handle. This may cause the customer to be late in making payments or even ignore payment deadlines.
Most financial account providers do not merely wait for delinquent customers to pay their debt. Instead, to recover all or a portion of the debt, providers employ various tactics to collect payments from their delinquent customers. Many financial account providers initially make an effort to collect overdue payments using some type of reminder, such as a letter or a phone call. Initial efforts are usually non-confrontational in instances where there has been a misunderstanding, such as the customer erroneously believing that all debt was previously paid or the financial account provider not receiving payments that actually were sent by the customer. A financial account provider often will receive payments from some customers in response to such a reminder. For other customers, however, this reminder may not be sufficient and their debts will remain unpaid despite the initial non-confrontational reminder(s).
Accounts that remain overdue for a lengthy period of time may be designated as a charged-off account. A charged-off account is an account on which a customer has not made a payment for a predetermined time period. Financial account providers consider charged-off accounts “written off” from their books (e.g., no longer receivable). Financial account providers may continue to attempt collection on charged-off accounts, but customers may no longer use the account to create further debt.
If initial collection efforts fail, some financial account providers resort to using debt collection agencies to collect payments from delinquent customers. For example, a credit issuer may give a number of charged-off accounts to a collection agency, while retaining ownership of the accounts. When customers provide payments to the agency, the agency keeps a percentage (e.g., 50%) and forwards the remainder to the financial account provider. Financial account providers may also try selling a portfolio of charged-off accounts to a collection agency. Under this arrangement, the agency essentially buys the portfolio for a fraction of the debt amount (e.g., less than one cent per dollar) and attempts collection on the account. Accordingly, a customer then owes the debt collecting agency instead of the original financial account provider. However, the practice of selling portfolios of charged-off debt and managing the charged-off accounts is expensive for the financial account provider and may jeopardize relationships with customers.